Pig Iron Mfrs. Asscn. v. Designated Authority, Min. Of Commerce

[Order per : C.N.B. Nair, Member (T)]. - These Appeals are directed against the Final Findings dated 27-8-1998 and Corrigendum dated 2-9-1998 or the Designated Authority (DA for short) with regard to imposition of Anti-dumping duty on Metallurgical Coke (Met Coke for short) from the People’s Republic of China (PR for short). In the Order dated 27th August, 1998 the DA gave the following findings.

“80. The Authority in view of foregoing concludes that –

Irrespective of the fact that the members of ICA can produce metcoke with less than 15% ash content, the Authority is inclined to agree with the exporters/importers that only metcoke with ash content of 15% and below is a like article to the metcoke imported from China RP.

Based on the information available with the Authority at the time of initiation, the petitioner had the standing to file the petition on behalf of the domestic industry. The petitioner satisfied the criterion for standing at the time of preliminary findings, considering the scope of the “like article”, as defined in the preliminary findings. Petitioner now has support of 100% of those producers production of whose constitutes “like article”.

The Authority has constructed the normal value of metcoke in China PR based on the information furnished by the co-operative exporters and the information available with the Authority in view of incomplete and insufficient response by the exporters/producers from China PR in spite of specific requests for information.

Metcoke originating in or exported from China PR has been exported to India below its normal value.

The domestic industry has suffered material injury. Injury has been caused to the domestic industry by the exports originating in or exported from the subject countries.

81. The Authority confirms the preliminary findings with regard to imposition of Anti-dumping duty and recommends imposition of definitive anti-dumping duties on all imports of metallurgical coke originating in or exported from the People’s Republic of China. The anti-dumping duty shall be the difference between Rs. 4673 and the landed price or imports per MT.

82. Landed value or imports for the purpose shall be the assessable value as determined by the customs under the Customs Act, 1962 and all duties of customs except duties levied under Section 3 and 3A of the Customs Tariff Act, 1975.”

1.1. The Corrigendum dated 2nd Sept., 1998 made the following “corrections”: “In the Final findings notified on 27th August 1998. Para 81 of the final findings shall be read as under:

81. The Authority confirms the preliminary findings with regard to imposition of anti-dumping duty and recommends imposition of definitive anti-dumping duties on all imports of metallurgical coke originating in or exported dumping duty shall be the difference between Rs. 4673 and the landed price of imports per MT subject to a minimum anti- dumping duty of Rs. 692 per MT".

2. The above findings were rendered by the DA on a petition filed by M/s. BLA Industries and Industries and Commerce Association, Dhanbad (domestic industry).

The present appeals of the PR exporters and Pig Iron Manufacturers’ Association Challenge these findings and seek setting aside of the findings, while the appeal of M/s. BLA Industries submits that the quantum of anti-dumping duty arrived at in the findings is required to be enhanced.

2.1 The PR exporters have challenged the imposition of duty on the grounds that the petitioner did not have the Standing to file the petition on behalf of domestic industry, that no duty was liable to be imposed as there was no dumping and that imposition of a minimum duty as envisaged in the corrigendum is illegal.

3. The submission of the PR exporters with regard to standing is that the petition did not satisfy the major proportion criterion under Rule 5 of Customs Tariff (Identification, Assessment and collection of Anti-Dumping Duty, on dumped articles and for determination of injury) Rules 1995 for the petition to be considered to have been made by or on behalf of the domestic industry. It has been submitted that the petition was opposed by M/s. Rashtriya Ispat Nigam Ltd. (RINL) a major manufacturer of Metcoke and once the production of RINL also is taken into account, the petition would not have the required support of domestic industry and thus, the petition would have no standing. It is not in dispute that if the production of RINL is taken into account, the petition would not have the required support. They have submitted that the designated authority’s action in exlcuding RINL for the purpose of computing support/opposition of domestic industry was not correct. The D.A. had excluded RINL on the ground that the product under consideration, i.e. Metcoke, imported from China was below 15% ash content while the Met Coke, produced by RINL contained more than 15% ash, making their product not like article. The authority had also held that the production of RINL is excluded also on the ground that RINL was a captive consumer of its product of Metcoke and was not selling their product in the market.

3.1 The submission of the PR exporters is that the average ash content in the Met Coke produced by M/s RINL during the period of investigation was 15.72%. They contend that the exclusion of this quality coke was not reasonable at all as this quality is also low ash met coke used for the same purposes as the coke under import from China. Further, even on granting of normal tolerance with regard to ash content, their produce would be qualified to be like article as compared to the less than 15% ash content met coke under import from China. With regard to exclusion of RINL on the ground of captively consumed production it has been contended that such exclusion is permissible only for the purpose of determining injury under Rule 11(3) and not for the purpose of deciding standing as domestic industry. It has also been submitted that this decision is not GATT compatible as other countries do not exclude captive consumption while considering domestic industry. Reliance has also been placed on a clarification to this effect from one Indian Mission to WTO (World Trade Organisation).

4. The domestic industry as well as the DA have opposed the above submissions on the grounds that according to the exporters’ own submissions before the D.A. the Met Coke above l5% ash content cannot be treated as low ash Met Coke and considered as like article and all imports of Coke from China were below 15% ash content. With regard to exclusion of captive consumers while computing support/opposition from domestic industry, it has been submitted that Proviso to Rule 2. (d) while defining domestic industry specifically has provided that in exceptional circumstances referred to in sub-rule (3) of Rule 11, domestic industry shall be deemed to comprise two or more competitive markets and the producers within each of such markets would be a separate industry. Captively consumed coke do not enter the market at all and, therefore, cannot be considered as part of competing goods. Accordingly, producers of captively consumed goods and producers of coke for sale should be treated as constituting two separate domestic industry for the purpose of consideration of domestic industry. In the instant case, RINL was, therefore, correctly excluded. Further, the exclusion of captively consumed goods is GATT compatible and the practice in European Union countries is to exclude such goods. Attention was specifically, invited to the decision of European Commission in the Dynamic Random Access memory case, where the DRAMS produced by IBM was excluded as they were captively consumed.

4.1 Learned Counsel for the D.A. has submitted that the contention regarding Standing is not sustainable at all in view of different features of this case. At the initial stage RINL had supported the petition. They changed their stand only subsequently. And once initiation has taken place, standing is no more relevant to the continuation of the proceedings as Rule 14 which relates to termination of proceedings does not stipulate that throughout the proceedings requirement regarding standing should be fulfilled. Further, either on exclusion of captive consumption or on treating metcoke of below 15% ash content a like products also RINL’s production would be excluded and the requirement for support would be fulfilled. With regard to the exclusion of captive consumption goods, he has pointed out that proviso to Rule 2(b) which defines domestic industry authorises treating of captive consumption goods as a separate domestic industry.

5. PR exporters’ contention regarding lack of Standing of M/s BLA to file petition for imposing of Anti-Dumping duty on met coke is based on the exclusion of RINL, a major producer of low ash content met coke, while deciding support/opposition of domestic industry. The exclusion has been sought to be justified on many grounds. It has been submitted that the exporters’ own criterion that only below 15% ash met coke could be treated as like products warranted such exclusion. Further, at the time of initiation, RINL had supported the levy and its later opposition is on account of pressure exerted on it by the Steel Ministry. Reference has been made in this connection to that Ministry’s letter dated 29-12-1997 opposing the levy. It has also been pointed out that Steel Authority of India and RINL are under the same Ministry, and therefore, should be treated as commonly controlled (and related) and both excluded once SAIL has been found to be ineligible to form part of domestic industry. The exclusion has been justified on the grounds that at the time of initiation of proceedings RINL was in support and the requirement for support is only at the stage of initiation and not for continuing with an already initiated investigation. The D.A. had also held RINL to be liable to be excluded as it produced met coke for its own use only.

5.1 Rules 5 and 14 relate to initiation and termination of investigations. Rule 5(1) lays down that DA shall initiate an investigation ‘only upon’ receipt of a written application by or on behalf of the domestic industry, except when the initiation is under Sub-rule 4 of Rule 5. Sub-rule (3) of Rule 5 relates to requirement for support for initiation of investigation. RINL had supported the levy at the early stage of proceedings. Therefore, the requirement for initiation had been met. Rule 14, which stipulates the various circumstances in which an investigation may be terminated, does not lay down that an investigation shall be terminated if producers change their position subsequently with regard to support/opposition. It provides that D.A. shall terminate the investigation if it receives a request to do so from the domestic industry. Thus, the rule makes a distinction between withdrawal of application and withdrawal of support in relation to termination. Therefore, it has to be held that withdrawal of support by RINL did not warrant termination of proceedings for want of standing.

5.2 Exclusion of RINL was justified on account of its produce being used captively also. It is admitted position that its manufacture of metcoke is not for marketing, but is for use by itself in further manufacture. Therfore, its production is not in competition with the imported goods. The economics of producers for captive consumption and of producers for sale are very different. The former saves on the costs of marketing sales, inventory etc. Therefore, these producers are, justifiably, treated as a separate market while computing domestic industry. This is the practice in European Union also. That RINL had sold a part of their produce during the period of investigation does not change their position from that of a producer for captive use. Rule 2(b) defines domestic industry as the domestic producers as a whole of the like article. However, proviso to this definition states that in exceptional circumstances, the domestic industry shall be deemed to comprise two or more competitive markets and the producers within each of such markets be deemed as a separate industry. As the captive consumption producers and producers for marketing constitute different categories of producers, under the proviso, they could be dealt with as separate domestic industries. Thus, RINL’s exclusion is legally .correct in the light of the proviso to Rule 2(d) also. In the circumstances, we are not able to find merit in the submissions on standing made by the PR exporters.

6. With regard to fixing dumping margin at 28.95% by the D.A., it has been submitted on behalf of PR exporters that the entire examination of the case by the D.A. was with reference to data furnished by Shanghai Pacific Chemicals (Group) as they had furnished better information than others. It has been submitted that Shanghai Pacific’s exports of metcoke was always at prices higher than their domestic sale price in China. Therefore, there was no basis to hold that the normal price of the goods was higher than the export price. It has been submitted that the exporters have filed details of domestic sale price and the authority should have accepted such sale prices as normal price instead of constructing normal price based on cost of production. In this context, it was submitted that the appellants is a limited company and its accounts are audited by qualified Accountants and the discarding of domestic sale price was contrary to the definition of normal price in explanation (c) of Section 9A of Customs Tariff Act, 1975. It has further been submitted that the method adopted by the D.A. while constructing the cost of production of metcoke (for arriving at the normal value) exported by Shanghai Pacific was also against the norms of cost accounting as part of the recovery from the by product, namely gas, has been disallowed. 47.54% of the gross cost was towards by-product; but the D.A. had restricted this quite unjustly to 19.44%. Had the full apportionment been accepted, there would have been no dumping margin.

6.1 In defence of the procedure followed by the D.A. with regard to fixing of normal value, it was pointed out by the learned Counsel representing the BLA that the domestic sale price of exporters from non-market economies cannot be accepted as normal prices. Pricing in these countries is determined by Governmental authorities and prices of goods and services are skewed on account of cross-subsidies, state controls and fixation of prices by Governmental authorities. The position is the same in respect of coal in China. He referred in this context to World Bank Report which evidences that price of coal in China is not fixed by the market. Reuters Business Briefing, dated 26-2-1996 also reports that price of coal is kept low compared with production cost. It was also pointed out that European Union does not accept prices or cost of production records of non-market economies, as a rule. Instead prices are worked out by adjudging the prices of an analogue/surrogate country. In the U.S. also special procedure is used to determine normal value of merchandise exported from non-market economies. In several cases, including for the import of coke from China into U.S., the U.S. authorities have used India as a surrogate country for determining costs in the Chinese market. The Ld. Counsel also has pointed out that accounts of the exporting companies cannot inspire any confidence inasmuch as they are involved in several operations in addition to met coke exports, e.g., China North Industries Corporation is an outfit of People’s Liberation Army and is engaged in the export of MBT tanks, AK 47 rifles to CIA etc. according to Reuters Business Briefing, dated 3-6-1998. He, therefore, pointed out that the D.A. was entirely correct to discard the domestic sale prices and in constructing a normal value based on cost of production. He, however, pointed out that the cost of production fixed by the authority was not correct, mainly on account of the allowance of over 19% provided towards the cost of production of by-products recovered in the manufacture of met coke, based on the claim of M/s. Shanghai Pacific that 47% of cost be allotted to by-product. This claim has no commercial basis at all. That this claim is not according to any business accounting methods is clear from the admission of M/s. Shanghai Pacific itself that they receive subsidy in respect of the gas produced by them as by-product and that they incur a loss in the sale of by-product while they sell the metcoke at normal price. Further, none of the other exporters had claimed any recovery of by-product. Therefore, no allowance towards realisation from by-products should have been allowed. As against this M/s. Shanghai Pacific has submitted that, even if allocation of realisation from metcoke and by product is made on quantity basis they should have got 33% adjustment towards cost of by-product and if normal value is fixed after allocating 33% towards realisation from by-product, there would be no dumping margin and imposition of duty.

7. The appellants’ grievance with regard to fixing of normal value is two fold. One is that the domestic sale price has not been accepted. And the other is that cost construction has not been done correctly by allowing full allocation towards by-product cost.

7.1 The D.A. has given detailed reasons in the impugned order as to how the domestic sale price of the exporters is not acceptable. First of all the exporters have not given full information about the sales during the period of investigation (1996-97) and all elements of cost of production. According to the definition of ‘normal value’, [Section 9B, explanation (c)(i) of Customs Tariff Act, 1975] it is the comparable sale value of the goods, in the ordinary course of trade, when meant for consumption in the exporting country. The exporters has not furnished transaction-wise list of all sales made in China supported by the relevant invoices during the period of investigation. Further, in the absence of detailed information about cost of production, the D.A. was not in a position to satisfy that the domestic sale price in PR was above the cost of production. For a price to be “in the ordinary course of trade”, it has got to be a price above the cost of production. The D.A. has also pointed out that the cost accounts kept by the exporters do not satisfy generally accepted accounting principles and do not clearly show the correct costs of various elements. Therefore, the accounts produced could not be gone by. The vast variation in the cost of production among the exporting companies themselves indicated that the prices are not economic market prices. Therefore, the D.A. had no option but to discard the domestic sale price and construct cost of production from the information made available by the largest producer, exporter, namely M/s. Shanghai Pacific Chemical Corporation following the principle of Best Information Available.

7.2 The second grievance of the appellant is that the D.A. while constructing the cost of production has not accepted the cost accounts of the appellants fully. The dispute in this regard is only with regard to the allocation of cost and price between Metcoke and the by-products emerging in the manufacture of metcoke. The appellants had claimed 47.54% towards by-products. The D.A. considered that to be a highly unrealistic claim. This was again on account of the difficulties in accepting the accounts as kept by the exporter. The M/s. Shanghai Pacific Chemical Corporation were the largest producer and exporter of metcoke in PR among the exporters who responded to the questionnaire of the Authority. The D.A., therefore, considered their data to be the best available information for the purpose of arriving at the normal value based on the cost of production. The D.A. accepted the cost data provided by M/s. Shanghai Pacific Chemical Corporation except with regard to the allocation made to by-product, namely, gas. The D.A. found that the appellants’ claim was that they were selling metcoke at economic prices but were selling gas at a loss and they were being subsidised for the supply of gas. The D.A. considered the allocation of 47.54% to be entirely unreasonable and inconsistent with industry norms. The Kirk Othmer Encyclopaedia on Chemical Technology had indicated 17.51% as normal. The Steel Authority of India, a similar large scale producer of metcoke in India, was having a realisation of 19.44% from by-product. The D.A., therefore, fixed the realisation at 19.44% for constructing the cost of production in the case of M/s. Shanghai Pacific. This has been objected to by the appellant on the grounds that the D.A. should have gone by the cost data of the appellant himself rather than relying on the data from a text or experience of another company in India. The D.A.’s difficulty with regard to the cost of production data is that, in an atmosphere of price control and subsidy, it is difficult to accept the data of an industrial unit. It has, therefore, preferred to be guided by the industry norm. This action has been firmly supported by the appellant Indian Manufacturer as well as the D.A.’s Counsel. It has been pointed out that the appellant is the only exporter claiming realisation from gas. China is a non-market economy and the accounting standards do not conform to norms. Therefore, the Authority could not have accepted the records of the appellant exporter. The appellant’s Counsel has also pointed out that according to World Bank Report and Reuters Business briefing the Chinese Coal Industry is under price control and there are no acceptable accounting standards in PR. They have also objected to the extension of the benefit of the deduction towards recovery of gas to other exporters. The appellant’s Counsel has also pointed out that practice in European Union and the U.S. is to discard the data regarding normal price of all the non-market economies including China and to go by the normal price as worked out based on a surrogate/analogue country and India is considered an analogue country with regard to China as cost of production would be somewhat comparable.

7.3  The D.A. has fully substantiated in the order as to how cost and pricing data of the non-market economy of PR is not a reliable indication of economic costs on account of various factors. It needs no argument that price control and subsidy distort prices. Therefore, we are of the view that the D.A. was justified in rejecting the domestic sale prices of PR and modifying the cost of production supplied by the exporter while constructing the normal value based on cost of production. The norm adopted while fixing the realisation from by-product was also highly reasonable. The D.A.’s action is in conformity with the definition of normal price in Section 9A of Customs Tariff Act, in as much as that section contemplates a price in the ordinary course of trade which is an economic price which takes in the cost of production and not a skewed price distorted by cross subsidies and governmental control. Accordingly, we reject the exporters’ submissions on the normal price fixed by the authority.

8. The appellant’s objection with regard to the minimum anti-dumping duty recommended in the corrigendum is that it is contrary to the relevant provisions in the law. It has been submitted that Section 9A of the Customs Tariff Act stipulates that anti-dumping duty shall not exceed the margin of dumping. It has been contended that fixing of a minimum duty would lead to imposing an anti-dumping duty even in cases where the export price is at or higher than the normal value. The appellant’s submission on this score is in conformity with the provision contained in Section 9A. The Section stipulates that “the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article”. It is clear from this provision that there could be no duty where the export is at or above the normal value. Therefore, the provision in the corrigendum fixing a minimum anti-dumping duty has to be held as contrary to law. This provision in the corrigendum is, therefore, required to be set aside. We do so.

9. The appellant exporters have not questioned the finding of the D.A. with regard to injury to Indian industry. In fact, during hearing, injury was conceded.

10. In view of the above discussions, we reject the PR exporters’ contentions regarding standing and normal value and uphold their contention against minimum anti-dumping duty.

11. We now proceed to consider the appeal of M/s. BLA Industries, the domestic manufacturer and other connected appeals. Their appeal raises two issues, that the duty should have been exporter specific and in US $ terms, though payable in Indian Rupees.

11.1 Their contention with regard to duty is that, under the final findings, rate of duty remains the same for all exporters, even though, dumping margins were higher in the case of some exporters. They, therefore, seek increase of duty in those cases. In the instant case, normal value of the exported goods has been fixed at same amount for all exporters and the same was arrived at by constructing the cost of production of the largest producer exporter who had made available the maximum data. However, export price is found to vary from one exporter to another, yielding different dumping margins. The anti-dumping duty is imposed in a case where an article is exported from any country to India at less than its normal value and the anti-dumping duty cannot exceed the margin of dumping in relation to such article. The dumping margin being dependent upon the normal price and export price and export price of the exporters being different, dumping margin varies from exporter to exporter. As the anti-dumping duty should be exporter specific, in the above case that duty must vary from exporter to exporter. We had occasion to consider this issue in our Final Order No. 1099-AD, dated 13-12-1999 in the case of M/s. Halder Topso Ltd. and it was held that anti-dumping duty has to be exporter specific. The submission of the appellant is in conformity with that order and merits acceptance. Anti-dumping duty is therefore, required to be increased to the level of dumping margin in the cases of those exporters whose dumping margin was higher. And the PR exporters who did not participate in the investigation proceedings have to bear duty at the highest rate.

11.2 The export prices in all these cases are available in CIF terms. Therefore, deductions towards freight and insurance etc., are required to be made to bring them to ex- factory levels. The D.A. had accepted a storage expenditure of 4.83 US $ PMT in respect of M/s. Shanghai Pacific Chemical Corporation while fixing the normal value. This deduction is also required to be allowed in addition to freight and insurance to bring the CIF prices to ex-factory level and dumping margins are required to be worked out as the difference between the normal value and export prices. As the injury margins in the present case are higher than the dumping margins, the anti-dumping duty rates have to be at the levels of dumping margins.

11.3 In the final finding and under the corrigendum amount of anti-dumping duty has been fixed in rupee terms. The Indian appellant manufacturer has made a major grievance of fixing the duty in rupee terms. They have demonstrated that on account of change of rupee value vis-a-vis Dollar the protection provided through anti-dumping duty remains highly eroded already (from over 19 US $ at the time of final findings to over 16 US $ now). They have, therefore, urged that anti-dumping duty should be fixed in dollar terms. Their submission is that trade in the goods takes place in dollar. The dumping margin should also be in dollar terms. They have, therefore, submitted that in order to retain the effect of duty at the dumping margin level, it is necessary to fix the duty in dollar terms. The Counsel for the PR exporters has contended that fixing of duty in dollar terms is not permissible. He has drawn our attention to the provisions of Sections 14 & 15 of the Customs Act in support of this objection.

11.4 Section 14 of the Customs Act relates to valuation of goods for customs duty. Section 15 relates to exchange rate to be adopted for the purpose of customs duty. We do not find any bar in either of the Sections to fixing anti- dumping duty in dollar terms, but payable/recoverable in Indian rupee. We also consider such action to be highly warranted in respect of anti-dumping duties. Anti-dumping duty is fixed after a finding that foreign goods are sold at less than their normal value in the Indian market causing injury to domestic producers. The amount of dumping margin is worked out in dollar terms as all aspects of trade are in US $. Section 9A stipulates that anti-dumping duty shall not exceed dumping margin. Thus the law’s intention and purpose is to afford a protection to the domestic industry at rates not exceeding the dumping margin and injury margin. We are, therefore, of the firm opinion that anti-dumping duty should be fixed in dollar terms so that erosion of the quantum of protection does not take place on account of changes in the exchange rate. In the present case the appellant domestic industry has shown that the level of protection has fallen from over 19 US $ at the time of final finding to over 16 US $ by now, on account of depreciation of Indian Rupee against US $. This is necessary to carry into effect the purpose of anti-dumping duty and is, therefore, fully in conformity with the law. We, therefore, accept the Indian Manufacturers’ contention on this score and hold that anti-dumping duty should be imposed in dollar terms in the instant case payable in Indian Rupees.

12. In the light of the above discussions and findings based on the data available on record, we pass the following orders :-

1. All imports of metcoke exported from or originating in the People’s Republic of China to India be subjected to anti-dumping duties at the following rates as indicated against each exporter :-

2. Subject to these modifications, the final findings dated 27th August, 1998 of the D.A. are confirmed. The Corrigendum dated 2nd September, 1998 is set aside.

12.1 All the appeals remain disposed of on the above terms.

13. Before parting with the case, we would like to highlight a disturbing situation which came to our notice while perusing the records of the Designated Authority. The Designated Authority is entrusted with a quasi-judicial function in matters relating to imposition of anti-dumping duty in terms of the provisions contained in the Act and Rules framed thereunder. Those provisions were enacted for fulfilling the obligations cast upon this Nation under GAT agreement and other international agreements. Therefore, the exercise of duties under the Act and Rules by the D.A. should not be interfered with by any authority howsoever high it may be. The post of D.A. is held by an officer in the rank of Additional Secretary, to the Government of India. To him, if a Ministry in the Central Government or a high ranking officer in the Central Government sends letters suggesting the manner in which the D.A. should act - whether to impose or not to impose anti-dumping duty - it will, to say the least, result in interfering with the exercise of his quasi-judicial function. This type of interference will send wrong signals to other nations also giving room for doubting the independent character/nature of the exercise of jurisdiction by the D.A. It will also cast doubt on the impartiality of administration of law in India. So, we earnestly want to impress upon the various authorities in the Government of India not to meddle with the functioning of the Designated Authority.

14.  Copies of this order shall be sent to Secretaries of all Ministries/Departments in Government of India.